By Tai Wei Lim

The Postwar Rise of Vietnam: Economic and Political Feats

After WWII,
the European colonial powers were spent. They tried to regroup and retake their
former colonies in the postwar developing world. Only the Americans in the West
were not in favor of the revival of colonization and envisioned an
international community (the United Nations or UN) that would have a Security
Council to resolve international disputes. This was sometimes known as the
“Rooseveltian vision”.

The former colonies of European powers were also
keen to agitate and fight for self-determination. In the postwar period, a
global wave of decolonization began. The rise of nationalism in East Asia
coincided with the period of decolonization. The Vietnamese under their leader
Ho Chi Minh was no exception to the regional rise of nationalism and fought the
French for independence. The Battle of Dien Bien Phu was decisive and the
French in Vietnam were defeated in 1954.

The Cold War intensified between the US and the
Soviet Union as the world gradually became a bipolar world divided between two
ideologies. The “Domino theory” during the Cold War reinforced American
political conviction and belief that South Vietnam should be prevented from
becoming communist to contain the spread of global communism. The Tet Offensive
proved to be a turning point and 1975 saw the downfall of Saigon, the bastion
of the South Vietnamese regime and its US allies.

In 1976, the Democratic Republic of Vietnam and
its US allies lost the war and the Socialist Republic of Vietnam was
triumphant. Over half a million people (mostly South Vietnamese) escaped in
boats. Ideological priorities were paramount during this period and the communist
government began to round up capitalists and sent them for re-education. Some
of them were made to do labor in camps.

In the postwar period, starting from North
Vietnam in 1955 to the contemporary period in the late 1980s, Vietnam began its
economic development using a central planning system. Policies were planned
centrally by the government and implemented by State Owned Enterprises (SOEs).
The whole central planning period ended in excess capacity and labor. Wage
control resulted in a lack of incentives and, consequently, Vietnam became
dependent on foreign aid. Soviet aid was crucial during this period.

Some entrepreneurial individuals networked with the
South Vietnamese diaspora in the US or reached into the Soviet Bloc to bring
daily products into Vietnam. These were probably the first prototypical
capitalists in Socialist Vietnam. The lack of supplies and shoddy
Vietnamese-made products, as well as the clamor for foreign-made products,
resulted in economic self-reflection. The 1982 Fifth National Party Congress
admitted that the revolution did not produce the economic results that were desired.

In 1986, Nguyen Van Linh rose to become
Secretary General of the Vietnamese Communist Party. He instituted economic
reforms known as Doi Moi. Cooperatives in the agricultural sector were
discontinued. Peasants were now able to grow crops on privately-owned plots of
land. Doi Moi was considered Vietnam’s own version of the Soviet Perestoika and
Glasnost under the former (and last) Soviet President Mikhail Gorbachev. There
was also a feeling that the Soviet Union’s days were numbered.

After 1989, Vietnam moved towards a market
economy. Consumption was not centrally determined. Consumption and production
were now guided by market forces. The state sector declined. With the collapse
of the Soviet Union in 1989, Vietnam could no longer depend on external help.
1989 marked the end of the Cold War with the fall of the Berlin Wall and in
1992, the Soviet Union dissolved. Meanwhile, China’s economy seemed to be
booming after its opening up in 1979 and the early 1980s.

In 2005, Vietnam shifted to a collective leadership
structure. It consisted of the general secretary, president, and prime
minister.

By the 1990s, Vietnam made peace with China,
Japan, and the West. For all of Vietnam’s important efforts in reforming their
economy, there was still a barrier that needed to be overcome. Vietnam’s
economy was still being constrained by the US’ Cold War-era policies against its
former enemies. The US was by far the world’s largest market, most dynamic
economy, and the new hyperpower in the post-Cold War unipolar world. US support
would be crucial for Vietnam’s economy to be successful. In 1994, the US lifted
its embargo on Vietnam.

In 1995, former US President Bill Clinton
normalized relations with Vietnam. With US support, Vietnam joined the World
Trade Organization. It had become a full-fledged member of the global trading
regime. Vietnam, like the other East Asian economic “miracles,” benefitted from
exporting to the US market and accumulated reserves, technological know-how,
skills, foreign exchange, and management knowledge for its own economy.

Foreign Direct Investment went into Vietnam from
the US and other Western investors as well as Japan and the Tiger economies.
The rest of the economic development narrative was a Vietnamese success story.
Literacy increased, lifespans lengthened, national poverty went down, and infrastructure
improved. After decades of hard work, Vietnam entered the middle-income country
category. Foreign investments poured in and Vietnam began to be known as the
“Little Dragon” economy after China which was the region’s (indeed the world’s)
largest-scale success story in poverty alleviation. These investments made
Vietnam into a major manufacturing sector in Southeast Asia.

In 2005, Vietnam shifted to a collective
leadership structure. It consisted of the general secretary, president, and
prime minister. This paralleled China’s own collective leadership shared
amongst 9 Politburo members (now 7 members). Vietnam and China have similar
socialist one-party systems that are hybridized with a market economy that has
private sector initiatives as well as SOEs.

There are some complementary features between
the two countries’ political systems. Their common socialist backgrounds and
economic reforms connote a special relationship that has been as close as a fraternal
socialist brotherhood during the Vietnam War era, and also as regional rivals
over the fate of Cambodia in 1979, Paracel Islands ownership, joining different
camps during the Sino-Soviet split, and historical memories (e.g. Qing
invasions).

Economically, the relationship is cyclical with
economic closeness punctuated by challenges. Vietnam opened up border trade
with China and became part of the ASEAN-China Free Trade Agreement deal.
Economic relations boomed in the first decade of the 21st century between China
and the ASEAN economy. Since its rise, China has become the individual ASEAN
countries’ top three ranking economic partner and a top-ranking economic
partner of ASEAN overall. However, maritime disputes have spilled over into
economic relations, with local Vietnamese protests against Chinese and Taiwanese
investments in the country.

Future economic and political relationships may
be dependent on the wisdom of the two countries’ leaderships in resolving
maritime disputes and working with each other in a transparent, mutualistic,
and beneficial manner (“win-win” situation) while maintaining bilateral
cooperation in harmony with the multilateral needs of other great powers with
interests in the region, and keeping the sea lanes of communication open
perhaps within the framework of a Code of Conduct.

Domestically, despite great economic success and
poverty alleviation, there is still work to be done: for example, uplifting of
minority living conditions and minority rights. With better living standards
and economic growth, the Vietnamese people now clamor for a better environment,
sustainable development, egalitarian development, equal opportunities for
social mobility, etc.